Hospital chain Sutter Health settles suit over anesthesia billing

Chad Terhune

A major California hospital chain, Sutter Health, agreed to pay $46 million and disclose more pricing information to consumers to resolve a whistle-blower complaint alleging false and misleading charges for anesthesia.

Sutter Health, which runs 24 acute-care hospitals in Northern California, said it reached the settlement Monday just prior to a trial starting this month over the allegations that it added thousands of dollars for "Code 37x" anesthesia charges that were already covered by other billing for the hospital operating room.

Nationwide, federal officials and consumer advocates have been putting pressure on hospitals to explain their high prices, while many employers have been demanding greater price transparency in an attempt to hold down costs.

The accord resolves a 2009 whistle-blower complaint against the Sacramento hospital company from a billing auditor, Rockville Recovery Associates. The California Department of Insurance joined the suit in 2011.

The state's insurance commissioner, Dave Jones, hailed the settlement as a major victory for consumers who often face large medical bills that are difficult to decipher. As part of the agreement, Sutter agreed to disclose its actual costs and prices for each part of its anesthesia billing.

The nonprofit health system also agreed to permit insurers to more readily contest its bills and to charge for anesthesia on a flat-fee basis going forward.

"This settlement represents a groundbreaking step in opening up hospital billing to public scrutiny," Jones said. "This new transparency should lead to lower prices and point the way to similar billing reforms for all types of hospital services."

Sutter didn't admit to any wrongdoing as part of the settlement, and spokesman Bill Gleeson said it opted for the agreement to avoid spending significant resources contesting the allegations at trial.

The state's hospital trade group also defended Sutter and said its billing practices were in line with industry standards.

"Sutter Health's method of billing for these services was, and still is, consistent with federal and state laws and regulations," said C. Duane Dauner, chief executive of the California Hospital Assn.

Under California's whistle-blower law, the insurance department said the state will get $20 million. Rockville Recovery Associates will receive a portion of the settlement, though the state agency didn't say how much.